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Mr. Eggar: If, at the end of his five-minute analysis of apparently leaked letters, the hon. Gentleman believes that there is nothing in the issue and that the Government remain--as they do--committed to regional selective assistance, why has he sought to make these points? Why has the hon. Gentleman sought to try to imply that regional selective assistance is in some way under threat?
The essence of my speech is that a former Chief Secretary does not believe in regional selective assistance and has written that in a letter, while the President of the Board of Trade says he does believe in it. The Government wonder why it is that they are not comprehensible to the British people, and why business does not understand them too well. There is a feeling--if I may use the word again--of drift in the Government, because two members of the same Cabinet have different views on the same subject.
We will not allow the Government simply to come to the Dispatch Box today with a spectacular scenario of success on inward investment, without revealing the deep rift within the Government, not only on the question of regional selective assistance, but on Europe. As it is half-term, we can throw these matters into the ring. The former Chief Secretary and the President of the Board of Trade have different views on the same subject. They have different views on Europe and different views on regional selective assistance-- "Back to back they faced each other, drew their swords and shot each other."
That is the essence of what the British Cabinet is about and how the public perceive it.
The Minister was correct to anticipate my point that the confusion in the heart of government is so profound on the central issue of regional selective assistance that it is hardly surprising that the public think that the Government have lost their way.
Column 1128We have already referred today to the social chapter opt-out and how the Labour party wants to reduce hours of work and overtime. The fact is that the social chapter is not of the slightest significance in inward investment decisions. Indeed, even at this stage it is quite clear that the opt-out will not survive the intergovernmental conference in 1996.
Companies inwardly invest in Britain to gain the benefits of the European Union. It is called looking ahead and forward planning. They know and understand that a Labour Government will sign up to the full social chapter. [Interruption.] Conservative Members can nod their heads sagely and say that there will never be a Labour Government, but they are living in the same cloud cuckoo land as the Government. The Minister has referred to Samsung. Can he tell us what clause there is in the agreement with that company--or, indeed, any other inward investor--that would allow it to opt out of its investment when a Labour Government take office? What clause says that such companies can take their money out of Britain and withdraw their facilities and products? Where does it say that, when the Labour Government sign up to the social chapter, those companies will draw stumps and leave our country?
Sir Michael Grylls (Surrey, North-West): The hon. Gentleman says that the only reason why foreign companies come to Britain is the European Union, and that it has nothing to do with labour and social costs. Why, then, are so many German firms coming to Britain?
Mr. Bell: The Government, with the help of the City of London, are not prepared to give the same long-term investment and support to such companies as, for example, Land Rover, which was then bought by BMW. The reason is that simple.
In fact, I did not say "only reason"; I also said that such companies came to Britain because of our traditional manufacturing base--we are the pioneers of the industrial revolution--and because our work force have the skills, discipline and commitment required. The Government would do themselves a political favour if they ceased to try to gain some advantage from the fact that Britain has opted out of the social chapter. No firm coming to our country has ever said that it was doing so because of our lack of the social chapter and a minimum wage.
Commissioner Padraig Flynn this week called for equality of action and minimum standards in the workplace. He said that that would apply in every part of the European Union. The European Commission, which does not always have the support of those on the Treasury Front Bench, has found no evidence to support the Conservative view on the social chapter. It says that Britain's non-participation has little or no bearing on decisions by multinationals on whether to open plants in Britain.
What the Commisision's analysis does show--the Minister touched upon it--is that Britain's attraction lies in the quality of our physical and communications infrastructure, the availability of skilled labour, and the scale of regional development grants. Those are the points made by Samsung.
Mr. Eggar: Taking what the hon. Gentleman said at face value, he and the Commission are paying tribute to the Government's policies over the past 15 years that have created such competitive advantages. Is he saying that the
Column 1129Commission is specifically disavowing Jacques Delors's statement that the social chapter opt-out meant that Britain would be a "paradise" for foreign investment?
Mr. Bell: I have no idea of the context in which Mr. Delors made that statement, but it is palpably false to say that Britain, rather than France or the other countries in the EU, is attracting investment because of our opt-out. In fact, global inward investment in France is greater than in Britain. Britain is an island, but no man is an island entire of himself. The Minister painted a distorted picture--a laser beam. We shall put the proper picture on the record today.
Mr. James Clappison (Hertsmere): Perhaps the hon. Gentleman should send a copy of his speech to the Labour spokesmen on education, transport and Treasury matters. It is a tribute to the Government's education policies, to investment and infrastructure and to the growth that has enabled all that to happen.
Mr. Bell: The hon. Gentleman is wrong. I shall answer his point later in my speech, because I had anticipated that it would be made. The subject today is inward investment. The Minister referred to outward investment and said how powerful and strong Britain was in the world. The fact is that, from 1981 to 1990, Britain's outward investment was $55.2 billion greater than its inward investment. That was the pattern throughout the 1980s, when the United Kingdom invested overseas on the same scale as Japan and the United States, even though the size of our economy was smaller. The average investment abroad was 3.1 per cent. of our gross domestic product. In 1992, Britain received 11 per cent. of global inward investment and was third behind France and the United States.
The greatest flow of investment came in the run-up to the single market. As the Minister confirmed, that run-up had the most significant impact on inward investment, with £17.4 billion coming into Britain during that year. The figure for 1993 was £9 billion.
Mrs. Currie: I hesitate to accuse anyone of the hon. Gentleman's distinction of massaging statistics and being selective. However, I refer him to the Library research paper 94/100, published on 25 October, which states:
a heck of a lot more recent than the period the hon. Gentleman is quoting--
"in common with most recent years other than 1992, the UK was host to more inward direct investment than any other EU member state."
Column 1130manufacturing and financial services. Financial services are not included in that document. If she adds financial services--
Mr. Bell: I am not. We resent the notion that only the Conservatives are cloaked in patriotism; that only the Conservatives can have a perspective on our country, on its direction, on business and on investment.
Mr. Peter Ainsworth (Surrey, East): It is a strange perspective to choose the worst year out of the past 15 on which to build a case. The hon. Gentleman implied that outward investment was not good a good thing. Does he understand that we earn a return on that investment? Can he clarify his position on that?
Mr. Bell: The figure which the hon. Member for Derbyshire, South (Mrs. Currie) gave was assisted by the devaluation of the pound, which was a great help to us. The hon. Member for Surrey, East (Mr. Ainsworth) makes his point some nine years too late, because the same point was made by Mr. Stefan Terlezki in this House in 1985, when he said that the return on our investment at that time was some £5,000 million a year. The balance of inward and outward investment does not tilt in our favour, because we are sending more money abroad than we are getting back into the country. That is the point that I am trying to make.
In any event, during the 1980s the flow of investment between states greatly increased. Foreign investment by companies based in the 24 member states of the Organisation of Economic Co-operation and Development has increased fourfold, driven by the increased globalisation of the world economy. Vast trading blocs have been created in the shape of the European Union, and now the North American Free Trade Area and the new bloc-- organised, structured and coherent--developing in the so-called Pacific rim.
Traditional industries throughout the whole of the European Union are in decline. All the states of the European Union have sought to attract foreign investment to areas where the decline has been steepest and unemployment highest. On the point made by the hon. Member for Surrey, East, we have continued consistently and persistently throughout all those years to send more money abroad than we have received. While we welcome inward investment, we cannot help but wonder how our economy would have fared if even half that money had been invested in our own country and we had not had to rely on others.
On the myth and shibboleth of a national minimum wage, how is it that the French and Americans do so well? Most inward investment is into the United States, and both countries have massive inward investment as well as a national minimum wage. Studies by the Japanese External Trade Organisation- -a little more distant but much more succinct than the document turned out by the Library, which I do not criticise, as it was turned out at short notice for this debate--and by the French Government, show that labour costs are not a major determinant of inward investment.
Recent research by the International Labour Agency shows that local demand for goods and Government support for industry are as important as wage costs. We
Column 1131have already seen that the main drivers of investment are the infrastructure and the availability of a skilled work force. Important as inward investment is for job creation, a coherent industrial policy is more important to job creation. The Labour party has studied in depth the book by the President of the Board of Trade, "Where There's a Will", in which he tried to create a coherent strategy. Whether he succeeded is open to doubt, and Labour Members certainly have their doubts.
I refer again to the wider picture of inward investment. Samsung has made a major investment in 200 acres of green and pleasant land around Wynyard and, last year, some 58 per cent. of our inward investment was in the form of acquisitions. In 1989, it was some 70 per cent. of all inward investment.
Is it not strange--this point was touched on briefly, but passed over quickly by the Minister--that foreign companies are prepared to invest in the skills of our work force, whereas the City of London is not? Our banks and financial institutions operate in the short rather than the long term, and those very institutions cannot see beyond the next takeover bid, thus inhibiting investment in our industries, which should be built up here rather than sold abroad.
The Minister will accept that not all inward investment is successful. The President of the Board of Trade certainly did at his last Question Time in July. Raytheon Jets in the constituency of my hon. Friend the Member for Alyn and Deeside (Mr. Jones) is closing less than 18 months after it was bought from British Aerospace. Incidentally, it is one of the most advanced production facilities in the aerospace industry.
Du Pont on Teesside is closing down the fibre business which it bought from ICI, with the loss of 520 jobs. Du Pont has made a substantial investment in our country, employing some 6,000 people, but the loss of the fibre business has been sad for those who had such high hopes when Du Pont took over the plant. The loss of those 520 jobs is in the here and now, and the 3,000 jobs that we expect from Samsung will come in 1998-99.
The Minister for Energy and Industry made a side swipe at his right hon. Friend the Member for Kingston upon Thames (Mr. Lamont). Although he did not mention him by name, we all knew who he had in mind. At a well- advertised fringe meeting at the Tory party conference, the right hon. Member for Kingston upon Thames declared categorically that he could not pinpoint a single concrete economic advantage that came to the United Kingdom from its membership of the Union.
The divisions within the Conservative party are profound when a member of the Government throughout the years leading up to the single market, who was aware of the massive inward investment consequent upon that single market, could make such a statement. One wonders how the Conservative party can continue to govern. It is three parties in one: partly pro-European and partly anti-European; partly in favour of regional selective
Column 1132assistance and partly not in favour. Divisions, schisms, doubts, uncertainties and incompetence run throughout the Government, including the Back Benches--
We shall not allow the Minister of State to put forward a false argument, even though it may be Friday. What the former Chief Secretary to the Treasury, the current Secretary of State for Employment, did not understand --it was clear from his letter that he did not understand it--is that selective regional assistance not only enables the United Kingdom to compete but enables the worker, backed by investment, to show his skills.
The Government's greatest failure over the past 15 years has been to spread uncertainty from one end of the land to another. Even those in work now feel uncertainty and insecurity in their place of work. Let us imagine someone working in Basildon receiving a visit from the Minister on the factory floor, like the Japanese general in the film "Bridge On the River Kwai". The Minister asks, "Are you happy at your work?" and the employee replies, "Yes, sir." He then asks, "Are you happy working 48 hours a week?" and the employee replies, "Yes, sir." He asks, "Are you happy working 60 hours a week?" and the employee replies, "Yes, sir." He asks, "Do you want the social chapter or a minimum wage?" and the employee replies, "No, sir, thank you, sir."
That is the ragged-trousered philanthropist philosophy which this Government have sought to inculcate in the land. The sense of vulnerability which they have created throughout our society has not made for a happy society.
Mr. Bell: No, I shall not. I am reaching the end of my speech. The hon. Member for Derbyshire, South is becoming a little concerned that I might continue a little too long and she will not be able to take credit for bringing Toyota to our country, so I shall try to wrap up as quickly as I can.
The hon. Member for Hertsmere (Mr. Clappison) spoke about the education system. It was not the Labour Opposition who sacked the Secretary of State for Education, but the Conservative Government. We want inward investment into our communications and infrastructure, and we want it in areas of social need, to create better homes, better schools and better hospitals. We want more private sector investment in this country, which is still held back by uncertainty about the future. All that needs to be borne in mind when we debate the narrow section of inward investment.
When the outside world looks at us, it sees an unstable and unbalanced economy. It also sees a Government who are leaderless, rudderless, witless and incompatible one with another. There is incompatibility between the Secretary of State for Employment and the President of the Board of Trade. There is incompatibility between those who are pro-Europe and those who are anti-Europe. The Government are unsure about the direction that Europe should take--whether it should be a free trade
Column 1133area or a true union, and whether it should be a true market economy without intervention or one with intervention.
There is no selective regional assistance and no hefty push for our industries. The Government are a parody of themselves. They must spend too much of their time watching puppet shows on television because they act like puppets. They are like characters out of "Spitting Image".
Mr. Eggar: Before the hon. Gentleman gets to the next 15 pages of his speech, will he tell us whether the Labour party is committed to planning, as his hon. Friend the Member for Livingston (Mr. Cook) appears to be, or not?
Mr. Bell: The hon. Gentleman should not incite me into reading the next 15 pages of my speech. I should hate to deprive Conservative Members who have been sitting here this morning of an opportunity to speak.
Planning and strategy are clearly a better way in which to look at our industry than the short-termism that we have seen over the past few years. We believe, of course, in long-termism. We believe in planning. We believe in the work force, and we believe in the work force having a say in the affairs of the companies in which they invest their working lives.
We believe in inward investment, but we shall have a coherent strategy for it all, rather than getting by on a wing and a prayer. At present, there is no fixed exchange rate for the pound, there is no certainty about inflation, interest rates are rising and there is no certainty for members of the public or the work force. We offer a great deal more reassurance than this Government have offered. Much to the relief-- [Interruption.] I am happy to stay on my feet for longer if the Minister so wishes.
Mr. Bell: The hon. Gentleman should not be so sharp that he cuts himself. We shall look at the intergovernmental conference as it comes up. We have made a variety of observations on all that. We know that the opt- out clause will go at that conference. The movement towards a single currency will continue. My right hon. Friend the Leader of the Opposition has said that there may be a referendum on that subject, thus shooting the fox of the right hon. Member for Kingston upon Thames. We are clear about where we are going. The Government are not clear about where they are going. For the Minister to come to the Dispatch Box today to vaunt a series of segments of inward investment, which we welcome, is no strategy and no economic policy. Not only do we know that, but the British public know that. If the Minister does not believe it, he should look at the latest opinion polls.
Column 113410.52 am
Sir John Stanley (Tonbridge and Malling): I shall not follow the hon. Member for Middlesbrough (Mr. Bell) in occupying the Floor for almost an hour and managing to say almost nothing. However, I agreed with his generous tribute to the fine Friday morning speech by my hon. Friend the Minister. I parted company with the hon. Gentleman thereafter, not least in his attempt to suggest that there was some degree of comparability between inward investment under the last Labour Government and inward investment under the present Government. There is no comparability. I vividly remember the years 1974 to 1979, not least the decisions taken by the major American car manufacturers that were looking at Europe. They looked at Britain, at Belgium and at Germany and they gave Labour Britain the thumbs down time and time again.
As my hon. Friend the Minister said, what has been achieved in inward investment since 1979 has been a huge success story. It has probably been the single most dramatic and furthest reaching economic and industrial success story for any Government in the post-war period. The benefits to our country in terms of jobs created, in balance of payments terms and in terms of potential tax revenue from the companies that have set up here are profound.
It is instructive to consider the reasons why this country has been so conspicuously successful in attracting inward investment on a scale wholly unmatched in the post-war history of this country and unmatched by any other member of the European Union. The one point on which there seems to be agreement on both sides is that our membership of the European Community is essential in attracting inward investment. I share my hon. Friend the Minister's view that it is eccentric for anyone to suggest that our membership of the European Community has brought no tangible benefit to this country. In my constituency, I need only look at the largest single employer, SCA, which is one of the leading Swedish paper manufacturers. As the House will know, my constituency is not in a development area with all the huge attractions of regional assistance. Nevertheless, SCA is making a £260 million investment in Aylesford, a decision that was critically helped by a £20 million grant obtainable from the Department of Trade and Industry, thanks to this Government. That investment was competed for fiercely by Germany and by the Netherlands, but it eventually came to this country. There is no conceivable way in which that £260 million would have come to this country if we had not been a member of the European Community. That position is mirrored throughout the country, in one constituency after another.
As has been said, our membership of the European Community is not the only explanation for inward investment. It clearly cannot be, because inward investors have 12 countries from which to choose. There must be factors peculiar to this country which explain why the overwhelming proportion of Japanese investment and American investment, and a great deal of Scandinavian investment, has come to this country in preference to other countries within the European Community.
As some hon. Members may know, I am heavily involved in the all-party groups in the House on Japan and on Korea. In that capacity, I have many opportunities to speak to Korean and Japanese companies, both in
Column 1135Korea and Japan and in this country, that have made investment decisions to come here. I have found their responses extremely instructive. Although, of course, there is some variation in their responses, I have found that they have given four principal reasons, time and again, in answer to the question why they decided to come to the United Kingdom, which I always ask.
Grant availability, which was mentioned by the hon. Member for Middlesbrough, is not one of those four reasons. I agree with him that if the grants were not available, one could forget about investment. However, the availability of grant is not peculiar to this country. The grants are on offer elsewhere in the European Union, and, in some countries, the grants on offer may be even greater than those available in this country. One cannot say that availability of grants is one of the reasons.
The first reason that the companies give me is that on making their detailed analysis, they find that the cost base for an industrial manufacturing operation in this country is now extremely attractive and in most cases more favourable than that in any other country in the European Union in which they might want to make such investment. The cost base is critical in a highly competitive world and a highly competitive market, where every company is anxious about its costs. Due to the success of Government policy in reducing inflation and creating a competitive wage market and labour market here, and because the Government have been careful not to put unnecessary financial and fiscal burdens on companies, through our policies we have created that highly competitive cost base.
If the hon. Member for Middlesbrough wants to reply with jibes about a coolie market, I remind him that, alongside our huge success with inward investment, we have managed to achieve a marked increase in real disposable income in this country--significantly higher than it was under the last Labour Government. If the hon. Member for Middlesbrough wants to characterise our country as a coolie economy, all I can say is that it was a darned sight more of a coolie economy in the 1970s.
Mr. Bell: The right hon. Gentleman is making a good speech and I hope that he will not spoil it by rewriting history so quickly, within the space of minutes. I never said that we had a coolie economy. I said that countries which invest here do not do so because they think that we are a coolie economy. We would not accept--in the north-east of England or anywhere else--that it is because we are such a low-wage. low-skill region that other countries invest here. That is contrary to what the right hon. Gentleman is now saying.
Sir John Stanley: I listened carefully to what the hon. Gentleman said and we can both look at Hansard . I have certainly heard some of the hon. Gentleman's hon. Friends make jibes to the effect that we have turned Britain into a sweatshop economy. That has been said on many occasions. However, we can let the matter rest on what is said in Hansard .
The first reason why companies come here is the competitive cost base that we have established. The second reason that they give is that for the first time they have confidence in the stability and sense of our industrial relations legislation and industrial relations climate. There is no doubt that the profoundly important changes and reforms in industrial relations legislation have created a climate of confidence for inward investors into Britain which simply did not exist previously.
Column 1136The third reason that companies give is that they have done their sums--as any company would do, particularly on taxes--and when they consider the tax position for companies in this country, including local taxes and corporation tax, they find that it is fiscally attractive to come here. The uniform business rate is now firmly pegged to increase no more than the rate of inflation. As my hon. Friend the Minister for Energy and Industry said, our corporation tax rate is one of the lowest in Europe. Those benefits flow directly from Government policies.
The fourth reason that companies give involves the language. There is no doubt that the fact that we speak English in this country is of profound economic and commercial importance to us. I believe that that is recognised in all parts of the House, as is the importance of supporting organisations such as the British Council which are in the business of promoting and expanding the use and knowledge of English around the world. Those four reasons are given again and again. I have another worry, which affects the whole country. Although I am confident that the factors that are encouraging the utterly unprecedented and huge infusion of overseas investment into our country will continue under the present Government because present policies will continue, I am deeply concerned about the commitments that the Labour party has made. I do not think that it will make any changes relating to the use of the English language--I feel secure about that. But when I consider the other three factors, I see Labour party policies that will work directly against the confidence of inward investors.
The Labour party has made a collection of commitments, including commitments to the minimum wage and the social chapter, which is bound to trigger off a spate of wage inflation that will have a direct impact on the cost base. It will almost certainly be driven to place other social costs on employers that will adversely affect their cost base. When I consider the collection of Labour party policies, I can foresee only the surrendering of this country's critical advantage--a highly competitive cost base for industrial operations, which is probably the biggest single factor bringing inward investment to this country.
The Labour party's intentions on trade union relations are still extremely vague--indeed, worryingly vague. The Labour party conference passed a resolution stating that Labour would repeal anti-trade union legislation; that amounts to a blank cheque.
Sir John Stanley: I looked closely at the reports, but if I have misread them I will certainly withdraw my comment. I am in no doubt from the speeches that I have heard again and again from shadow employment spokesmen that the Labour party is committed to repeal elements of trade union legislation which are now on the statute book--the exact elements are so far unknown. I hope that the Labour party will take early steps to clarify which bits of the legislation it intends to appeal. Any attempt to take us back to the position under the legislation of the mid-1970s will greatly frighten inward investors and deter them from returning here. Clearly, negotiations will be taking place in the Labour party on the withdrawal of clause IV. I should be very surprised if
Column 1137the hugely influential trade union element within the party does not exact its pound of flesh in return for the abolition of clause IV. We shall wait to see the detail of those policies.
If previous history is anything to go by, I see no prospect of the attractive rates of corporation tax surviving a change of Government in this country. There will be a substantial hike in corporation tax and the fiscal advantage that we offer inward investors will disappear. I am extremely worried about the continuation of one of the Government's most precious achievements, which is of profound importance not least to the regions that are heavily represented in Parliament by Opposition Members. I am worried that that priceless advantage could be surrendered if attempts are made to implement Labour party policies.
I warmly applaud the Government Front-Bench team on the achievement of the huge success story of inward investment. It is one of the signal achievements of the Government since 1979 and is of profound benefit to literally hundreds of thousands of individuals who have jobs, the security of good jobs and good earnings as a result of the inward investment that we have achieved. I am certain that my right hon. and hon. Friends will continue to ensure that that success story of inward investment survives.
Mr. Denis MacShane (Rotherham): It is a pleasure to follow the right hon. Member for Tonbridge and Malling (Sir J. Stanley) who, like me, shares an interest in and, I hope, a friendship with, the people of Korea.
The Minister asked for a definition of socialist planning. The right hon. Gentleman knows that Korea's great growth in the 1970s and 1980s came at a time when all the banks belonged to the state, all credit was allocated by the state and there was heavy investment in education. Korea now has far more PhDs per capita than we do. As a result, Korea has emerged as a leading industrial nation; in some sectors its workers earn more than their equivalents in the United Kingdom. I am not sure whether that is a form of centralised state, dirigiste planning of which I approve, but it is far from the failed economy theory being applied in this country. The core question is why, despite long years of inward investment--which started in the 1970s, when Sony and other Japanese companies established plants here under a Labour Government--it has not made our country richer. The UK has the highest rate of inward investment of any European country; yet since 1980 the average growth in gross domestic product was significantly below all our European competitors, let alone the new dynamic economies of Asia.
The World Development Forum based in Switzerland, which is not a socialist organisation, has just published its world competitive report, which ranks the UK 14th--significantly below Sweden, Norway and other partnership economies. According to the Office of Economic Co-operation and Development, the increase in GDP per capita between 1981 and 1991 was $6,663 in the UK. In Germany it was 25 per cent. more, in France 17 per cent. more and in Italy 13 per cent. more.
Column 1138My hon. Friend the Member for Dunfermline, East (Mr. Brown), the shadow Chancellor, is mocked without mercy for his use of the term "endogenous growth theory". Soon after making that phrase the subject of international discussion at the Labour party's international economic conference last month, a distinguished colleague on the Labour Front Bench, who is not in the Chamber at present, told me that she had misheard the phrase as "erogenous growth theory" and had thought that, at long last, Labour was on to a surefire winner. My hon. Friend the Member for Dunfermline, East was right. Nations that have focused on endogenous growth--that is, growth generated within the economy--have handsomely outperformed the UK in all the main indices of comparative international economic league tables.
Mr. Waterson: For the sake of completeness, does the hon. Gentleman realise that the hon. Member for Dunfermline, East (Mr. Brown) is also mocked for his prediction that unemployment would rise month by month, when the opposite has been the case?
Mr. MacShane: The mocking was about a choice of words. The English language is noble, and perhaps all that is left to us after 15 years of Tory misrule. I shudder when I hear Greek words such as "endogenous" creeping into national discourse.
Total inward investment between 1985 and 1990 was £64.9 billion. The UK's outward investment over the same period was £143 billion. In 1993, £9 billion came into the UK, but £17 billion left to be invested overseas. For every £1 coming into the country, £2 has left to create jobs in other nations. The standard of living and of investment of all British people has been held back and sacrificed to create a rentier economy in line with Tory exogenous or externally generated growth theory.
Inward investment has not helped to recreate the manufacturing sector that was destroyed in the early 1990s. The bulk of it has been in the primary and tertiary sectors--oil, trade and distribution, and financial services. I have figures only for the late 1980s because more up-to-date statistics were not available from the Library. They show that the percentage of inward investment in secondary or manufacturing sectors was higher in Germany, Italy and France than in the UK. Much was made of the investment in the north-east recently announced by Samsung, which we all welcome--but only this week, Daewoo announced a £600 million investment to build Korean cars in Romania, which is £150 million more than Samsung's investment in the north-east. That shows Britain in competition with Romania as a low-wage nation on the fringe of Europe as a target for Korean inward investment.
Although Japan is much talked about, Japanese investment in the UK is barely half that of Australia and one tenth that of the United States of America. Japanese investment represents only 40 per cent. of investment from European Free Trade Association countries. We must consider more than the dynamic Asian economies when identifying sources of inward investment.
The flow of inward investment from non-EC countries peaked after the setting in train of the single European market. Investment in the UK was made because we were part of the European Community and were committed in the mid and late 1980s to an integrated Europe. Since then, and despite the Minister's assurances, Government
Column 1139policy has changed. Instead of opting into Europe, the Prime Minister proclaims his pride in the UK being the opt-out nation of Europe.
At the Tory conference three weeks ago, we heard from the platform and at fringe meetings the cry, "Europe, Europe, Europe--out, out, out!" The "Euro -septics", who are not represented in this debate, are the new Tory trotskyists before whom the Prime Minister must run. If they have their way, not only will the flow of inward investment dry up but the rest of Europe will take great pleasure in shutting out foreign-owned UK production from its current access to the European market.
As to the reasons why the Japanese and others invest in the UK, I cannot share the running order given by the right hon. Member for Tonbridge and Malling. Claims by Government spokespersons that foreign companies are attracted to the UK by its deregulated, low-wage, low-tax economy are not confirmed by any professional or scientific survey. In each case, the main reason given was familiarity with the English language and the fact that other linked companies were already established here.
Other reasons produced by the Government fall to the ground. As to low tax, another Library research paper, published in May, shows that in terms of the percentage of gross earnings less cash benefits to a couple with two children, the UK employee has a higher tax burden than his or her equivalent in France, Belgium or Austria. The UK tax burden in that category, which covers most managerial and skilled workers, is higher than the average for European OECD nations.
Mr. MacShane: My recollection is that the same research paper showed that tax on capital was 0.1 per cent. lower in 1990-1991 than in 1979. Exclusion from the social chapter is given as a reason, but that was not mentioned by any inward investing company. The peak flow of inward investment occurred prior to the Maastricht treaty. The competition at world level for investment that developed in the 1980s is now so intense that we must find other ways to attract inward investment to the UK, rather than see it go to China, Latin America and eastern Europe. Reference was made to trade union legislation; yet the Japanese have sought out pro- active union agreements. It is sad that only the Opposition pay tribute to the partnership policies of the Amalgamated Engineering Union with Toyota and Nissan, and of the Transport and General Workers Union, the Manufacturing, Science Finance Union and the AEU with Rover, now owned by BMW. Those innovative union agreements are welcomed by the investing companies. I wish that the Government would pay greater tribute to the work of the unions in that respect.
Column 1140Low pay may figure, and competitive costs were mentioned; yet two days ago the Secretary of State for Employment said at Harrogate that he wants a high-wage economy.